- The Washington Times - Thursday, September 22, 2011

ANALYSIS/OPINION:

What if Barack Obama had begun his presidency by enacting a permanent tax-cut bill that further lowered income tax rates, cut the capital gains rate in half and reduced business taxes across the board?

Instead of a $1 trillion spending stimulus that enlarged government and created few jobs, and the other wasteful initiatives he tried and has since proposed that have cost or will cost our economy several trillion dollars, what if he had put that into pro-growth tax cuts to end what has turned into a monster four-year recession with no end in sight?

If he had, the Great Recession would be behind us, the economy would be growing at a brisk clip, unemployment would be declining, federal revenues would be rising, and the deficit would be shrinking by now.

That’s what happened with the Kennedy tax cuts in the 1960s, when that decade ended with a budget surplus, and in the 1980s with the Reagan tax cuts, which ended a severe recession in two years, created millions of new jobs and resulted in surging quarterly growth rates that Mr. Obama can only dream about.

Former President Clinton doesn’t mention it now, but the economy took off in his second term after he signed a capital gains tax cut that unlocked investment capital and led to an explosion of jobs in the high-tech sector and a budget surplus.

But Mr. Obama came into office with the twisted belief that George W. Bush’s tax cuts had worsened if not actually caused the economic catastrophe he inherited. To a large extent, he turned half the voters against tax cuts.

However, the recession triggered by the subprime mortgage debacle was not caused by Mr. Bush’s tax cuts, which carried the economy through some major body blows, including the 2001 dot-com recession, the Sept. 11 terrorist attacks, a series of scandals on Wall Street and Hurricane Katrina.

By 2007, the year before the 2008 recession, federal receipts had risen by more than $800 billion, the national jobless rate had fallen to a low 4.6 percent, and the budget deficit was a modest $161 billion.

That fiscal record was virtually erased from the nation’s public memory by the fierce recession that followed and by Mr. Obama’s false charges that the Bush tax cuts had gotten us into this mess. That’s right, the very same tax cuts that Mr. Obama agreed to extend for two years to give the economy time to recover.

But Mr. Obama’s advisers underestimated the severity of the recession and the need for stronger medicine. Capital investment was on strike; banks toughened lending rules, which made loans harder to get; and businesses large and small were struggling or going under.

In a $14 trillion economy, the 1930s-era idea pushed by Mr. Obama that we could spend our way out of the recession with $800 billion for “shovel-ready” jobs was preposterous on its face. It takes too long to get money into the contracting pipeline, and once it’s spent, the jobs end. That, of course, is what happened.

It’s generally believed that Mr. Obama and the Democrats have poisoned the well on income tax rate cuts despite that policy’s record of success, and many polls support raising taxes on businesses and the richest Americans, just as Mr. Obama proposes to do with his $1.5 trillion plan.

However, other polls suggest the American people are more closely divided on this issue than previously has been reported. When the Gallup Poll asked Americans this summer, “Do you think our government should or should not redistribute wealth by heavy taxes on the rich?” 49 percent answered “No, should not” and 47 percent said “Yes, should.”

“Seven in 10 Americans believe the government should levy taxes on the rich to redistribute wealth, while an equal proportion of Republicans believe it should not,” Gallup said. “The slight majority of independents [who decide most elections] oppose this policy.”

The bottom line: “While a solid majority of Americans, 57 percent, believe money and wealth in the U.S. should be more evenly distributed among the people, fewer than half favor using the federal tax code to do so,” Gallup said.

Redistributing income is at the heart of what Mr. Obama has proposed in his plan to raise taxes on upper-income people - from owners of small family businesses that earn more than $200,000 a year to seniors who live off capital gains and dividends from their retirement funds.

But a tax-hike policy that proposes to divide the nation’s shrinking economic pie into small slices to redistribute it among our body politic is not a prescription for growth. It’s a recipe for economic decline, fewer employers and jobs, less investment and increased poverty.

The Federal Reserve’s ominous statement Wednesday forecast “significant downside risks” ahead for our nation’s economy in the coming months. No one expects things to improve this year or even next under this administration’s impotent tax-and-spend policies.

“The economy is imploding thanks to incompetence in Washington,” says University of Maryland economist Peter Morici, who warns that the economy right now is dancing “along the precipice of a second recession.”

“President Obama is hardly the victim of his predecessors’ mistakes as much as his own decisions,” Mr. Morici says an analysis of the economy’s rapid descent.

We need a policy that deregulates the economy to free it from Mr. Obama’s rigid central planning, that will drill for oil to halt the currency drain to the Organization of Petroleum Exporting Countries and that will lift the tax burden that is pulling our country ever deeper into an economic abyss.

Donald Lambro is a syndicated columnist and former chief political correspondent for The Washington Times.

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